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Malaysia said it agreed with Indonesia to improve cooperation in the palm oil industry given the grim global economic environment that has stoked worries about demand and pushed down prices.

PHOTO: BLOOMBERG

[LONDON] Oil swung between gains and losses in New York as further declines in China's stock market fanned concern that its fuel demand may slow while global crude markets remain oversupplied.

Futures remained below US$40 a barrel after rising 2.8 per cent on Tuesday. Stocks in China, the world's second-biggest oil consumer, closed lower to cap their worst five-day rout since 1996. US crude inventories probably increased by 1.45 million barrels through Aug 21, a Bloomberg survey showed before a report from the Energy Information Administration on Wednesday.

Oil's decline since this year's peak in June has deepened to more than 35 per cent amid a global commodities rout. The Bloomberg Commodity Index of 22 raw materials including crude and metals was little changed after rebounding Tuesday from a 16-year low.

"Growth fears in China of course cause very bad sentiment for commodities and therefore crude oil as well," Hannes Loacker, an analyst at Raiffeisen Bank International AG, said by e-mail from Vienna. "It looks now as if sentiment won't turn any better in the next couple of weeks." West Texas Intermediate for October delivery was at US$39.39 a barrel on the New York Mercantile Exchange, up eight US cents, at 11:34 am London time after earlier sliding as much as 0.7 per cent. The contract climbed US$1.07 to US$39.31 on Tuesday, recovering from the lowest close since February 2009. Total volume was about five per cent above the 100-day average. Prices have dropped 26 per cent this year.

Brent for October settlement was 21 US cents higher at US$43.42 a barrel on the London-based ICE Futures Europe exchange. It advanced 52 US cents to US$43.21 on Tuesday. The European benchmark crude traded at a US$3.99 premium to WTI.

Concern that China's policy makers are struggling to prevent a hard landing in the world's second-largest economy has convulsed global markets, triggering a rush from all but the safest of assets. The Shanghai Composite Index fell 1.3 per cent to 2,927.29 at the close.

Crude inventories in the US, the biggest oil consumer, probably increased to 457.7 million barrels last week, based on the median estimate in the Bloomberg survey of 11 analysts. That will keep supplies almost 100 million barrels above the five- year seasonal average.

Stockpiles shrank by 7.3 million barrels, the American Petroleum Institute said, according to reports on Twitter. Supplies at Cushing, Oklahoma, the biggest US oil-storage hub and the delivery point for WTI futures, were unchanged from the prior week, said the industry group in Washington.

Venezuela wants the Organization of Petroleum Exporting Countries to cooperate with Russia to stabilize oil prices, President Nicolas Maduro said on state television. The South American nation's oil basket has fallen to US$35 a barrel and could weaken further to US$30 or lower, he said.